German Trust Co. v. Board of Equalization of City of Davenport Tp.

• Decision Date: 16 October 1903
• Citation: 96 N.W. 878,121 Iowa 325
• Parties: THE GERMAN TRUST COMPANY, Appellant, v. THE BOARD OF EQUALIZATION OF THE CITY OF DAVENPORT TOWNSHIP, Appellee. THE GERMAN TRUST COMPANY, Appellant, v. THE CITY OF DAVENPORT AND ITS MAYOR AND ALDERMEN IN COUNCIL ASSEMBLED AND THE BOARD OF EQUALIZATION OF SAID CITY, Appellees
• Court: Iowa Supreme Court

96 N.W. 878

121 Iowa 325

THE GERMAN TRUST COMPANY, Appellant, v. THE BOARD OF EQUALIZATION OF THE CITY OF DAVENPORT TOWNSHIP, Appellee.

THE GERMAN TRUST COMPANY, Appellant, v. THE CITY OF DAVENPORT AND ITS MAYOR AND ALDERMEN IN COUNCIL ASSEMBLED AND THE BOARD OF EQUALIZATION OF SAID CITY, Appellees

Supreme Court of Iowa, Des Moines

October 16, 1903

Appeal from Scott District Court.--HON. P. B. WOLFE, Judge.

MODIFIED and AFFIRMED.

Lane & Waterman for appellant.

Fred W Neal for appellees.

OPINION

THE opinion states the case.--Modified.

WEAVER, J.

The German Trust Company, doing business at Davenport, Iowa was by the assessor of the township assessed for taxation upon the sum of $ 800,000, moneys and credits alleged to be in the possession of said company as the agent of others. A similar assessment for the same year was made by the city assessor for taxation for city purposes. The board of equalization having in each instance refused to cancel the assessment, the company appealed to the district court, by which said assessments were confirmed in the sum of $ 636,650, and from this judgment the company appeals.

The facts are not involved in any material dispute, and may be stated as follows:

(1) On January 1, 1902, the appellant company had in its possession promissory notes and mortgages aggregating $ 636,650, which had been executed to said company by third persons, and by it assigned to customers or clients desiring such investments.

(2) In each instance the assignment was made to such client or customer, and the possession of the securities was retained by the appellant under a written agreement, the substance and terms of which are indicated by the following blank form which was employed in said transactions:

"Receipt and Memorandum of Sale."

"The German Trust Company of Davenport, Iowa,

"In consideration of the payment of Dollars, has this day sold to the following Mortgage Note, towit:

No. of Loan, Amount, $ .

Principal Dollars.

Name of Maker

Date of Note

When Due

Interest Payable

"Secured by first Mortgage on being acres in County Iowa on conditions as follows:

"Said note, and papers belonging thereto, shall remain deposited with the said German Trust Company, for safe keeping and collection.

"The German Trust Company shall receive and retain all interest in excess of per cent. collected on said note as compensation for its services, also the interest accrued to this date, amounting to $ and belonging to said Trust Company.

"Interest and principal when collected to be placed to the credit of said (assignee) with the German Savings Bank, of Davenport, Iowa.

"The German Trust Company reserves the right and privilege to repurchase said Note and Mortgage at its face and interest at maturity, or before, upon default by the maker in payment of interest or any condition contained in the mortgage."

(3) In each instance the appellant retained or reserved to itself the interest which had accrued upon the security sold to the date of the assignment and a share of the interest thereafter to accrue upon the principal--usually one-half of one per cent per annum. The notes, as a rule, were payable in installments, at the option of the maker.

(4) Under said contract appellant attended to the collection of the notes, looked after the insurance of property covered by the mortgages, and, in case of sale of any of the mortgaged lands for delinquent taxes, bid them in for the protection of the security.

(5) Of the $ 636,650 in securities so held by the appellant the sum of $ 418,950 was owned by residents of Scott county, Iowa and the remaining $ 217,700 by non-residents of the state.

The appeals taken by plaintiff from the general assessment and from the assessment for city purposes have been submitted together, and will both be considered in this opinion.

I. The assessment in question was evidently made upon the theory that the facts as above recited call for an application of the provisions of section 1320 of the Code. That section reads as follows: "Any person acting as the agent of another and having in his possession or under his control or management, any money, notes, credits or personal property belonging to such other person, with a view to investing or loaning or in any other manner using or holding the same, for pecuniary profit for himself or the owner, shall be required to list the same at the real value, and such agent shall be personally liable for the tax on the same, and if he refuse to render the list and swear to the same, the amount of such money, property, notes or credits, may be listed and valued according to the best knowledge and judgment of the assessor." It is argued by appellant that "or," where that word first occurs in said section, is to be construed as "and," thus making it necessary that moneys and credits, in order to be taxable to the agent, must not only be in his possession, but under his control and management as well. This construction is said to be required on account of the absurd and unjust results which must follow from a literal application of the statute as written. A literal interpretation, it is said, would make the man who temporarily holds the money of another for safekeeping, the lawyer or banker who holds a note for collection, and every person who for any purpose chances to have the physical possession of moneys or securities belonging to another, liable to taxation thereon; thus leading to gross hardships to many persons who have no means of protecting or reimbursing themselves. The statute will not, in our judgment, bear such a construction; nor does there seem to be any occasion for resorting to the violent, but sometimes allowable, expedient of reading into a word used by the legislature a signification or meaning which it does not usually bear. The word "possession" as well as the words "control" and "management," as employed in section 1320, are each and all limited and qualified by the remainder of the section in which they are found. Reading the entire provision, we find that, to justify the assessor in requiring one person to list the property of another, several facts must be shown: First, agency of the party listing; second, possession or control by the agent of the moneys, notes, or credits of his principal; and, third, such possession or control must be held by the agent with a view to investing or loaning or in some other manner holding or using the same for the pecuniary profit of himself or of his principal. Hence, in the hypothetical cases stated by counsel, there can be no liability because of the absence of the third essential fact element above noted. No agent is liable to taxation for the property of another in his possession or under his control, unless he holds that possession or is vested with that control for the particular purposes named in the statute.

Such being the case, we have, then, so far as this point is concerned, simply to ask whether the appellant's possession of the moneys listed by the assessor is of the character contemplated by the statute. That inquiry, we think, must be answered in the affirmative. It may be conceded, perhaps, that under the peculiar form of contract between appellant and its clients it does not appear to hold the securities for the purpose of reloaning or reinvesting the moneys collected thereon; but it is quite clear it does hold the same in its possession and control for the pecuniary profit of the said clients and of itself. The profit accruing to both parties is that which is usual in that class of investments--the interest accruing upon the securities handled. The money originally loaned belonged to appellant. By the contract of assignment appellant received an amount equal to the principal sum invested, and retained a share of the earnings upon the original loan. Both assignor and assignee have a direct property interest in the security; but the former retains the right of manual possession and control. Appellant's agency is coupled with an interest, and the assignee cannot, under the terms of the contract, deprive his agent of the possession of the property. Both parties reap a financial profit out of the transaction. The principal puts his money into the purchase of the security, subject to the reserved interest and right of the agent. The latter retains the absolute right to keep the security in its own possession, and undertakes to collect and account for the proceeds. When collection is made, the principal is to receive back the original face of the security, with the major part of the interest accruing from the date of his purchase, while the agent retains all the interest accrued at the date of the purchase, and a minor fraction of the interest thereafter earned. It would be difficult to create an agency coming within the meaning of the statute if this be not one.

Counsel say, however, that the "possession" and "control" mentioned in section 1320 have no reference to securities or written instruments, but to the moneys which they represent; and, as the contract of assignment does not empower the appellant to loan or invest such moneys when collected, the statute is not applicable. This construction leads to a manifest disregard of the expressed legislative intent. The language of the act is clear and unequivocal. The duty to list the property for taxation is enjoined upon the agent who has in his possession or under his control either "money, notes, credits, or other personal property" belonging to another "with a view to investing or loaning or in any other manner using or holding the same for the pecuniary profit" of himself or principal. Appellant did "hold" the "notes and credits" listed by the assessor, and did have such "control" of the same...